"We risk becoming the best informed society that has ever died of ignorance"
- Rubén Blades

"You can't make up anything anymore. The world itself is a satire. All you're doing is recording it"
- Art Buchwald

"It's getting exciting now, two and one-half. Think of everything we've accomplished, man. Out these windows, we will view the collapse of financial history. One step closer to economic equilibrium"
- Tyler Durden

"It is your corrupt we claim. It is your evil that will be sought by us. With every breath, we shall hunt them down."
- Boondock Saints

Thursday, March 20, 2014

The Basic Cost To Co-Locate

I was scanning through the Nasdaq OMX PHLX Pricing document tonight and came across a couple interesting price tables. This may appear to be mind-numbing and that is because the fragmentation within our micro-structure is beyond comprehension when we first come in contact with the nuts and bolt of how it's all built. It is critically important for traders to understand the scope of what they are dealing with and I hope this one example will show you how complex and lucrative things have become.

For a cabinet (rack space) here are Installation Fees and Ongoing Monthly Fees: 


Residency at the Philadelphia Options Exchange is established. Let us get you connected within the Co-Location center and also to the outside world via External Telco/Inter-Cabinet Connectivity:

Now you're set up to and ready to establish your connections to the various market centers: 


We're going to have to pay for power because Vervet Monkey's won't work for free: 


These number don't include the costs for platforms and data feeds or broker fees and trading costs. When you hear people, like Dr. John Bates of Progress' Apama, claim that automated trading is accessible to everyone, that is true and it is a stretch of the phrase (as seen by the costs above), but what is important is that we as traders understand the true scope of what we are dealing with. We can't trust what other people say always, we need to go through Nasdaq OMX PHLX documents on Sunday nights to truly get an idea of what other competing traders have access to. If you can't win on guaranteed economics (special order-types and rebate fee structure), you need to find a strategy that cuts through this complexity, such a tape reading where you can focus just on the basics - how many contracts at what price are being exchanged. 

If you want to dig further, Haim Bodek has a great section on his site that offers you links to various documents regarding Equity and Option exchange fees, order types, rules, etc.